Today, Oil falls below $38

Oil prices extended losses for a second day Tuesday in Asia, falling below $38 a barrel, as a loss of investor confidence that the global economy will recover soon swept across stock and crude markets.

Benchmark crude for April delivery fell 59 cents to $37.85 a barrel by midday in Singapore on the New York Mercantile Exchange. The contract overnight fell $1.59 to $38.44.

U.S. stock indexes fell to the lowest since 1997 on Monday on investor fear that a government stimulus package and plan to rescue ailing banks won't keep the worst recession in decades from deepening.

Months of dismal economic news, highlighted by massive job cuts, have weighed on the psyche of investors and undermined faith that the economy will recover in the second half.

The Dow Jones industrial average fell 3.4 percent Monday and the Standard & Poor's 500 index dropped 3.5 percent.

Most Asian stock markets also fell sharply at the open on Tuesday.

"The stock and crude markets are reflecting the same negative sentiment about the broader economy," said Gerard Burg, minerals and energy economist with National Australia Bank in Melbourne.

Even large output reductions by the Organization of Petroleum Exporting Countries have failed to boost prices. OPEC has announced 4.2 million barrels a day of production cuts since September, and the group's leaders have said it's likely the 13-member cartel will cut more supply at a meeting on March 15.

"There's relatively little that further production cuts can do," Burg said. "They've already cut a sizable amount of their production."

The fall in oil prices - crude has plummeted 74 percent since July - may itself eventually trigger a rally, as producers of high-cost fields shut down operations to avoid losses.

"Some producers are probably struggling to be profitable, and that puts a constraint on the downside," Burg said. "It puts a very real floor in place."

Burg said he expects oil to trade between $35 and $45 a barrel for the next few months.

In other Nymex trading, gasoline futures fell 0.39 cent to $1.04 a gallon. Heating oil dropped 1.14 cents to $1.16 a gallon, while natural gas for March delivery slid 5.7 cents to $4.04 per 1,000 cubic feet.

Brent prices fell 47 cents to $40.52 on the ICE Futures exchange in London